Several key themes developed this week. The first was a slowdown in the stock market. The major US stock markets posted their first consecutive declines in weeks on Tuesday, while the Nasdaq posted a small gain. This week’s stock market forecast suggests that a record high of 50 for the S&P 500 could be a tough ask with the US election looming. European indices were mostly flat to lower, as they too have lost their anchor amidst some major geopolitical risks. There are several major US earnings releases today, including Boeing and Tesla, which will report earnings after the US market closes. These will be closely watched for any positive earnings surprises that could propel the US blue chip stock market back to winning ways.
Other themes dominating financial markets today include the divergence in global bond markets and the Trump trade. First of all, US bond yields rose this week, as markets priced in the prospect of two more rate cuts this year. Markets are now pricing in a 42 basis point rate cut by the end of the year, compared to 79 basis points priced in for the Fed’s November and December meetings a month ago. This is a big change and has helped the dollar strengthen. UK yields also rose ahead of next week’s budget. However, European yields fell, as markets priced in a 45 basis point rate cut at the ECB’s December meeting.
Gold prices hit another record high on Wednesday, linked to Trump trade, as well as Middle East tensions. Brent crude remained above $75 a barrel, although oil gave up some gains today, while gold prices continued their parabolic rise.
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